The automatic adjustment mechanism that makes the economy move toward the long-run Phillips Curve is

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In the long-run, inﬂation expectations and wage adjustments drive the economy towards the long-run Phillips Curve by influencing worker bargaining power and the level of output. As workers anticipate higher inflation, they demand higher wages, causing firms to increase prices leading to a higher price level. As a result, there is an upward shift in the short-run Phillips Curve. However, over time, workers and firms adjust their inflation expectations, and wages adjust accordingly leading to a downward shift of the short-run Phillips Curve. Ultimately, the economy settles at the natural rate of unemployment at which the short-run Phillips Curve intersects the long-run Phillips Curve.

The Automatic Adjustment Mechanism That Makes the Economy Move Toward